New Orleans storm fails to dent metal market

As the rain and furious winds which have hit New Orleans subside, its residents can breathe a cautious sigh of relief.
Among them, the owners of London Metal Exchange approved warehouses who shared fears that Hurricane Gustav could wreak similar levels of damage as 2005's devastating Katrina. Nearly 40% of the LME's zinc stocks, which currently stand at 61,000 mt, are currently warehoused in New Orleans.
Pacorini Metals USA -- which owns three LME approved warehouses in New Orleans housing aluminium, lead, copper, North American aluminium alloy, tin and zinc -- has not yet resumed business since the storm.
Pacorini commercial manager Mario Casciano spoke to Platts and said that the Italian-based company's New Orleans warehouses were currently closed due to electricity issues, but that he believed that they would be up and running by Wednesday. Two other companies with LME approved warehouses in New Orleans, Henry Bath LLC and C.Steinweg, declined to comment on the state of stocks housed in their premises.
Investors had feared that Hurricane Gustav, which had originally been given grade four status before being downgraded to a category two storm on Sunday ahead of hitting the US coast, would have a similar impact on LME warehouse stocks to Katrina.
In the wake of the 2005 hurricane, the LME suspended as good delivery against LME contracts all LME warrants for zinc, copper and primary aluminium stored in New Orleans on September 6, 2005, after flooding caused damage to stocks. At the time 248,575 mt of zinc, over half of the LME's stocks of 558,225 mt were warehoused in the city.
"There were people out there selling the rumour that the same thing could happen again this time," commented Calyon analyst Robin Bahr. "There was an outside chance that it could affect the zinc stocks but it's a lot less touch and go this week and prices seem to have settled. However, we can't be completely sure that stocks haven't been affected until people get back and see for themselves."
Zinc's rally on the LME base metals complex ahead of the weekend was driven for the most part by fears that New Orleans LME stock would be affected. The white metal weakened Tuesday and dipped down to $1,755/mt at the end of the third ring, down from highs earlier in the month of $1,880/mt.
"The city is still pretty much shut down, however, as far as we know the warehouses are fine," said LME spokesman Tom Lant, adding that owners of LME warehouses he had spoken to had said that they had not yet been back to their warehouses, but did not think stocks had been affected.
While power issues caused by the hurricane were yet to be resolved, and many of the city's residents remain evacuated, the relatively moderate impact of the storm did little to bolster LME metal prices, which continued to weaken Tuesday in the face of a strengthening dollar.
--Michelle Madsen, michelle_madsen@platts.com